AKTRIN Forecasts US Furniture Sales Of $89 Billion

Furniture World Magazine

Real GDP grew at a healthy rate of 5.6% (annualized, seasonally adjusted) in the 1st quarter of 2006. This positive picture changed significantly in the 2nd quarter, with a growth rate of only 2.9%. The American economy is showing clear signs of slowing down. Growth in the final 2 quarters of this year may fall below 2.5%. Due to the good showing at the beginning of 2006, average GDP growth for this year as a whole may lie around 3.5%, which is still higher than the 3.2% rate in 2005. The average rate next year may be only around the 2.7% mark which would be the lowest during the past five years. Personal income growth is one of the most important leading indicators for predicting furniture consumption. Helped by increased job creation last year, personal income may hold up better than the economy as a whole. Income growth stood at 5.2% in 2005. It will probably accelerate to 7.1% this year but - in conjunction with less robust employment growth in 2006 - it may slow down a bit next year. Nevertheless, we believe personal income growth will remain above the 5% mark. If we take inflation and taxes into account, the anticipated growth rate of real disposable income will be much less, that is only about 3.0% this year and 2.7% next year. This is still a respectable rate if compared to the 1.2% in 2005. Growth of American consumer spending stood at 3.5% last year. Due to the higher interest rates, it will lag behind the growth of personal income. It may remain above 3% this year but almost certainly fall below that mark in 2007. The durable consumer good market is subject to erratic fluctuations as such goods are quite sensitive to interest rates. After growing at 9.0% in the third quarter of 2005, it fell by a staggering 12.3% in the last quarter, only to rise again to 19.8% in the first quarter of this year (all rates are annualized). The average annual growth of durable good consumption last year amounted to 5.5%. It will grow only at an estimated 4.7% in 2006 and decline further to below 3% next year. Thanks to low mortgage rates, residential construction was a very strong sector of the American economy in 2004 and 2005. The value growth during those two years amounted to 9.9% and 8.6% respectively. The housing market is now oversupplied and is predicted to suffer a decline of -2.1% this year and an even larger decline of close to 5% next year. In volume terms, this translates to 2.07 million new housing units in 2005 but only an expected 1.88 million in 2006. Furniture consumption in the USA grew at a rate of 4.7% in 2005. In line with the advances of disposable income, we foresee a better rate of 5.9% in 2006. Next year may witness a minor slowdown to an anticipated rate of 4.3%. This would bring the market value to about $ 84 billion this year and $ 87 billion next year. For more information on this study contact AKTRIN Furniture Information Center. Web: http://www.furniture-info.com. E-mail: aktrin@aktrin.com.